XEQT vs VT: Should Canadians Buy US-Listed Global ETFs?

A few years ago, I went down a rabbit hole on Reddit’s PersonalFinanceCanada that nearly cost me weeks of productive investing time. Someone posted a spreadsheet showing that buying VT – Vanguard’s US-listed Total World Stock ETF – was technically cheaper than holding XEQT. The MER difference was significant: 0.07% for VT versus 0.20% for XEQT. On a $500,000 portfolio, that is $650 per year in savings.

I was sold. I started researching Norbert’s Gambit, opened a USD account, and began mapping out the most tax-efficient way to hold VT across my TFSA, RRSP, and non-registered accounts. Three days later, I had a headache and zero new investments.

That experience taught me something important: the cheapest option on paper is not always the best option in practice. The gap between VT and XEQT looks compelling until you factor in the currency conversion costs, the withholding tax headaches, the lost simplicity, and the very real possibility that you will just procrastinate instead of investing.

Let me walk you through the full comparison so you can decide which one actually makes sense for your situation.

1. What Each ETF Actually Is

Before we compare, let’s make sure we are on the same page about what these two funds do.

XEQT – iShares Core Equity ETF Portfolio

XEQT is a Canadian-listed, all-in-one equity ETF. You buy it in Canadian dollars on the TSX, and BlackRock handles everything – the global diversification, the rebalancing, the currency exposure. One ticker, done.

VT – Vanguard Total World Stock ETF

VT is a US-listed global equity ETF. It holds stocks from around the world in a single fund – but you need US dollars to buy it, and it follows a market-cap weighted global allocation (meaning more US, less Canada than XEQT).

2. The Fee Comparison: It Is Not as Simple as 0.07% vs 0.20%

On the surface, VT wins the fee battle by a mile. The MER is 0.07% compared to XEQT’s 0.20%. That is a 0.13% annual difference, which adds up over time.

But MER is only part of the total cost of owning an ETF as a Canadian. Here is the full picture:

Currency conversion: The hidden cost nobody talks about

If you buy VT, you need US dollars. There are three ways to get them:

1. Your broker’s standard conversion – Wealthsimple charges a 1.5% spread (or 0% with a Premium subscription at $13/month). Most bank brokerages charge 1-2.5%. On a $10,000 purchase, that is $150-$250 gone immediately.

2. Norbert’s Gambit – You buy a dual-listed stock (like DLR/DLR.U) on the Canadian side, journal it to the US side, and sell it in USD. This cuts conversion costs to near zero, but it takes 2-5 business days, requires multiple trades, and some brokers make it unnecessarily complicated.

3. Wealthsimple Premium USD account – If you pay $13/month for Wealthsimple Premium, you get a USD account with no conversion fees. This is the cleanest option, but that $156/year subscription fee needs to be factored into your cost comparison.

For most investors making regular monthly contributions, the currency conversion friction alone erases the MER advantage of VT.

3. Withholding Tax: Where VT Wins in One Specific Scenario

This is where the comparison gets interesting for investors with large RRSP balances.

How foreign withholding tax works

When US companies pay dividends, the US government withholds 15% in tax before the money leaves the country. Canadian-listed ETFs like XEQT cannot recover this withholding tax in any account type – it is baked into the fund’s returns as a hidden drag of roughly 0.25%.

US-listed ETFs like VT, however, are treated differently in an RRSP. Thanks to the Canada-US tax treaty, US-listed ETFs held in an RRSP are exempt from the 15% US withholding tax. This saves you roughly 0.25-0.35% per year.

The RRSP advantage

In an RRSP, VT has a genuine cost advantage:

• VT total cost: 0.07% MER + ~0% withholding = ~0.07%
• XEQT total cost: 0.20% MER + ~0.25% withholding = ~0.45%

That is a ~0.38% annual difference. On a $500,000 RRSP, that is roughly $1,900 per year. Over 20 years with compounding, the difference becomes meaningful.

The TFSA disadvantage

In a TFSA, VT actually has worse withholding tax treatment because the Canada-US treaty does not protect TFSAs. VT’s US dividends get hit with the full 15% withholding, while XEQT’s structure provides a small buffer.

4. Geographic Allocation: More US or More Canada?

XEQT and VT slice up the world differently:

The big difference is the home country bias. XEQT deliberately overweights Canada at ~25%, while VT gives Canada its market-cap weight of roughly 3%.

Arguments for XEQT’s Canadian overweight:

• Canadian dividends get preferential tax treatment in non-registered accounts
• No currency risk on the Canadian portion
• Your expenses are in Canadian dollars, so Canadian stocks provide a natural hedge
• Canadian banks and resource companies provide good diversification to US tech

Arguments for VT’s market-cap weight:

• More “pure” global diversification
• Less dependence on Canada’s resource-heavy, bank-heavy economy
• Higher US allocation captures more of the world’s innovation engine

Personally, I think XEQT’s Canadian overweight makes sense for most Canadians. We live here, we spend Canadian dollars, and our tax system rewards Canadian dividends. But reasonable people can disagree on this.

5. The Convenience Factor: This Is Where XEQT Pulls Away

Let me be blunt: for 95% of Canadian investors, XEQT is dramatically more convenient than VT.

Here is what buying XEQT looks like:

1. Open Wealthsimple account
2. Set up automatic deposits
3. Buy XEQT
4. Repeat forever

Here is what buying VT looks like:

1. Open Wealthsimple account (or another broker with USD trading)
2. Fund your CAD account
3. Convert CAD to USD (either pay the spread or do Norbert’s Gambit)
4. Wait for settlement
5. Buy VT in your USD account
6. Track your adjusted cost base in CAD for tax purposes
7. Deal with US estate tax exposure if your US holdings exceed $60,000 USD
8. File additional tax forms if required

The VT route adds friction at every step. And in investing, friction kills returns – not because of the direct costs, but because friction causes procrastination. Every month you delay investing because the currency conversion is annoying is a month of lost compounding.

6. Fractional Shares and Auto-Invest

XEQT has another practical advantage on Wealthsimple: fractional shares and automatic investing.

With XEQT, you can:

• Set up recurring weekly or biweekly purchases that match your payday
• Invest any dollar amount (even $10) thanks to fractional shares
• Never think about it again – true set-and-forget

With VT on Wealthsimple, you can also buy fractional shares in the USD account, but you still need to handle the currency conversion step. On other brokerages like Questrade, fractional shares for US-listed ETFs may not be available at all.

The auto-invest feature alone is worth the MER difference for most people. Automating your investments removes the single biggest risk to your long-term returns: yourself.

7. US Estate Tax: The Risk Nobody Mentions

Here is a genuinely scary one that most VT advocates gloss over.

If you are a Canadian resident holding more than $60,000 USD in US-listed securities (including VT) and you pass away, your estate may be subject to US estate tax at rates up to 40%. The Canada-US tax treaty provides some relief, but the rules are complex and may require your estate to file a US tax return.

XEQT, as a Canadian-listed ETF, is not subject to US estate tax regardless of how much you hold. This is a meaningful advantage for investors with large portfolios.

If your VT holdings grow to $200,000+ USD, this is not a theoretical risk – it is something your estate would need to deal with.

8. When VT Actually Makes Sense

I have been pretty pro-XEQT so far, so let me be fair. There are scenarios where VT is the better choice:

VT might be right for you if:

• You have a large RRSP ($200,000+) where the withholding tax savings are significant
• You already have a Wealthsimple Premium subscription or a brokerage that offers cheap USD conversion
• You are comfortable with Norbert’s Gambit and do not mind the extra steps
• You prefer VT’s market-cap weighted global allocation with less Canadian home bias
• You are making infrequent large purchases (lump sums) rather than small monthly contributions, which minimizes the currency conversion hassle
• You understand and are prepared for the US estate tax implications

The ideal VT investor is someone with a $300,000+ RRSP who makes quarterly lump-sum purchases, uses Norbert’s Gambit efficiently, and does not mind a bit of extra administrative work in exchange for lower costs.

9. When XEQT Is the Clear Winner

XEQT is better for you if:

• You invest monthly or biweekly in smaller amounts
• You use a TFSA as your primary investment account
• You want to automate your investments and never think about currency conversion
• You prefer simplicity and want a single CAD-denominated holding
• You do not want to worry about US estate tax exposure
• You value Canadian home bias for tax and currency reasons
• You are a beginner or intermediate investor who wants to keep things simple
• Your portfolio is under $200,000 where the fee savings are minimal in dollar terms

For most Canadians – especially those early in their investing journey – XEQT is the obvious choice. The small MER premium buys you enormous convenience, simplicity, and peace of mind.

10. Let’s Do the Math: How Much Does the Difference Actually Cost?

Let’s put real numbers on this. Assume you invest $500 per month for 25 years with an average annual return of 8% before fees.

In a TFSA, the difference is negligible – roughly $2,000 over 25 years, easily wiped out by a single currency conversion mistake or a month of delayed investing.

In an RRSP, the difference is more meaningful at ~$24,000 over 25 years. But this assumes you execute the currency conversion flawlessly every time, never procrastinate, and are comfortable with the added complexity.

The question is: is that $24,000 over 25 years worth the ongoing hassle? For some people, absolutely yes. For most people, probably not.

11. My Recommendation

Here is my honest take after years of thinking about this:

Start with XEQT. For most Canadians, stop there.

If your portfolio grows past $200,000-$300,000 and most of it is in an RRSP, then it might make sense to explore VT for the RRSP portion specifically. By that point, you will have enough investing experience to handle the currency conversion and tax complexity with confidence.

But do not let the VT optimization rabbit hole delay your investing by even a single month. The difference between XEQT and VT is measured in fractions of a percent. The difference between investing today and investing “once I figure out the optimal setup” is measured in years of lost compounding.

The best global ETF is the one you actually buy consistently. For most Canadians, that is XEQT.